Sources of Barriers to Entry

A barrier to entry in economics refers to those factors which make it difficult for other companies to enter into a market began the production of goods or services and therefore gives rise to monopoly. Given below are some of the sources of barriers to entry –

1. Economies of scale is a barrier to entry for other companies because once a company which is already in the business attain a production volume which leads to decrease in the unit cost of a product it is difficult for other companies to achieve that sort of unit cost of a product and therefore companies do not make an effort to compete against such companies which achieved economics of scale.

2. Copyright and trademarks also are a source of barriers to entry, because for some products and services companies have copyright which gives them the privilege of producing goods or providing a service to customers.

3. Access to distribution channels is another major barrier to entry as those companies which are established in a line of business usually have control over channels of distribution through their relationship with distributors and therefore new entrants to an industry will find it really difficult to market their products or services which proves to be a significant barrier to entry.

4. There are many industries where at the start up one requires huge capital investments and therefore small companies with limited resources cannot compete in such industries.

5. Sometimes government policy through licensing requirements and other such requirements prevents the entry of new players in an industry.

Apart from above sources of barriers to entry there can many other sources of barriers to entry depending on the country and industry in which a new company is looking to enter.

0 comments… add one

Leave a Comment


Related pages


define foreign exchange reservesa characteristic of capital budgeting isprocess costing meaningpaid rent for the month journal entryconsignor meaningcapm assumptionsnormal good vs inferior goodexamples of accounting conventionscontingent liabilities accountingcomplementary and substitute goods examplesexample of systematic risk and unsystematic riskexamples of mixed economy countriesbarder and tradeadvantages of foreign exchange reservesaccrued income examplesdvr abbreviation meaningdistinguish between explicit cost and implicit costprovision accounting entriesautocratic dictatordifference between consignee and consignorhow to calculate national income by expenditure methodearned value management disadvantagesadvantages of authoritarianredeemable preference shares definitionbill discounting meaningdifference between accounts receivable and accounts payableadvertising merits and demeritswhat is the income effect and substitution effectprepaid insurance journal entry examplewhat does consumptive meansystematic and unsystematic risk examplesfifo disadvantagescost push inflationvertical takeoveradvantages of conglomerate mergerauthorized shares vs outstanding sharesnondurable consumer goodscalculation of crr and slrconsumer taste and preferencesdifference between autonomous investment and induced investmentadvantages of deflationofs in stock marketfull convertibilityadvantages and disadvantages of economic globalizationlimitations of jitwhat are derivative marketsdisadvantages of living in rural areasdistinguish between normal and inferior goodsdifferentiate between socialism and capitalismmeaning of trial balancecharacteristic of mixed economydisadvantages of profitability ratiosmateriality concept accountingdefinition centrally planned economydisadvantages of socialist economyreducing balance method of depreciationpros of command economydurable consumer goods definitiondefine direct expensedisadvantages of online banking to customersbenifits of ppfautocratic leadership disadvantagesexample of congeneric mergerdisadvantages of financial institutionsdupont system analysisdemand loan interest ratedemand loansdisadvantages and advantages of social mediathe merits and demerits of internetunbilled accounts receivable journal entryskimming vs penetration pricingpayback method advantagesdefine a traditional economyskimming pricing example